2017 (6) TMI 720 - AT - Service Tax

Rent-a-cab operator service - providing vehicles to the clients on hire basis - whether the service rendered by appellant is to be classified as rent-a-cab service - Held that - similar issue decided in the case of Sachin Malholtra 2014 (10) TMI 816 - UTTARAKHAND HIGH COURT , where it was held that in the case of a rent-a-cab scheme, as is clear from the very fundamental principle underlying the scheme, it is to give the hirer the freedom to use the vehicle as he pleases, which, undoubtedly, implies that he must have possession and control over the vehicle. This is the fundamental distinction between rent-a-cab and a pure case of hiring - the appellants liability for service tax under rent a cab service cannot be contested. The claim of the appellant for abatement available as per N/N. 1 of 2006 dated 01.03.2006 as well as the exemption for threshold turnover limit applicable for small scale service provider during the relevant financial years have not been considered for a decision by the lower authorities - the matter has to go back to the original authority for reconsideration. Appeal allowed by way of remand.

Issues Involved:
1. Service tax liability under the category of "rent a cab service."
2. Distinction between hiring and renting of vehicles.
3. Consideration of abatement under Notification 1/2006.
4. Examination of the threshold turnover limit for small scale service providers.

Detailed Analysis:

1. Service Tax Liability Under the Category of "Rent a Cab Service":
The appellants are engaged in providing vehicles to clients on a hire basis, and the dispute concerns their service tax liability under the category of "rent a cab service" for the period from October 2006 to July 2011. The original authority confirmed a service tax demand of ?1,89,295/-, along with penalties under Sections 78 and 77 of the Finance Act, 1994. The Commissioner (Appeals) upheld this order. The Tribunal examined various high court decisions and concluded that the appellants' liability for service tax under "rent a cab service" cannot be contested. The Tribunal upheld the impugned order confirming the service tax liability on merits.

2. Distinction Between Hiring and Renting of Vehicles:
The appellant argued that they were not engaged in providing taxable service as a rent-a-cab operator but were merely hiring out their vehicles while maintaining control over them. They relied on the Hon'ble Uttarakhand High Court's decision in Sachin Malhotra 2015 (37) STR 684, which distinguished between "hiring" and "renting" of vehicles. The Tribunal referred to this case and other high court decisions, including Vijay Travels 2014 (36) STR 513 (Gujarat) and the Punjab & Haryana High Court's decision in Commissioner of C. Ex. v. Kuldeep Singh Gill, which held that service providers could not escape tax liability on the ground that hiring is different from renting.

3. Consideration of Abatement Under Notification 1/2006:
The appellant contended that the lower authorities did not consider the abatement available to them under Notification 1/2006 dated 01.03.2006. The Tribunal acknowledged this claim and noted that the lower authorities had not considered the abatement for a decision.

4. Examination of the Threshold Turnover Limit for Small Scale Service Providers:
The appellant also argued that the lower authorities did not examine the threshold turnover limit for small scale service providers, which was applicable during the relevant period (8 lakhs/10 lakhs). The Tribunal found that this aspect had not been considered by the lower authorities and needed reconsideration.

Conclusion:
The Tribunal concluded that while the appellants' liability for service tax under "rent a cab service" is upheld on merits, the claims regarding abatement under Notification 1/2006 and the threshold turnover limit for small scale service providers were not considered by the lower authorities. Therefore, the matter was remanded back to the original authority for reconsideration of the quantification of service tax, taking into account the available abatement and SSI exemption based on the details submitted by the appellant. The appeal was disposed of in these terms.

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